digital economy

KUALA LUMPUR, MALAYSIA: IDC believes that the 2019 Malaysia National Budget recently announced by Lim Guan Eng, the Finance Minister of Malaysia, was an important incremental step in achieving Malaysia’s vision to become a fully connected digital economy. The recent budget focused on the Industry 4.0 blueprint, titled “Industry4WRD”, which aims to make Malaysia the prime destination for high-tech industries in the region. The government plays a central role in the successful implementation of a robust Industry 4.0 strategy by creating clear policies and priorities to support the private sector. Initiatives like Industry4WRD focus the energy and creativity of the private sector around a common mission to create an era in which AI, robotics, 3D printing, and IoT will take centre stage and lead to digital transformation in Malaysia. IDC believes that direct support for Public-Private Partnerships (PPP) is necessary to focus Malaysia’s resources and boost the economic growth of the country.

The Malaysian government is continuing to adopt the necessary policy changes and budget priorities to strengthen the economic foundation for digital transformation and technology investments. For example, on November 7th, Malaysian Technology Development Corporation (MTDC) Sdn Bhd invited small and medium enterprises (SMEs) to embrace the fourth industrial revolution with the launch of the Centre of 9 Pillars (Co9P) initiative. This centre creates a physical location for ecosystem partners to interact for the development and incubation of solutions based on nine technology pillars including; Big Data Analytics, Autonomous Robots, Simulation & Augmented Reality, Horizontal & Vertical Integration, Internet of Things (IoT), Cybersecurity, Cloud, Additive Manufacturing and Supply Chain. IDC forecasts the size of the Big Data/Analytics investment in Malaysia will be $US670 million in 2019 led by the Banking industry while spend on IoT will be US$2.2 billion with the largest investment going into Manufacturing (2018 Big Data Spending Guide, 2018 IoT Spending Guide).

For almost a decade, IDC has been chronicling the emergence and evolution of the 3rd Platform of technology; the drive into Cloud, Mobility, Social and Big Data/Analytics technologies. The adoption of these technologies has accelerated as enterprises commit to the 3rd Platform and undergo Digital Transformation (DX) on a massive scale. Malaysia’s digital economy is in the early stages of creating an infrastructure with key core technologies (cloud, big data/analytics, artificial intelligence [AI], mobility, social business, robotics, internet of things [IoT], and 3D printing) for better public services and an economic boost. Rapid advances in cloud computing, connected devices, mobile, social media and data analytics are contributing to the growth of SMEs in Malaysia. SMEs constitute 98.5% of the total businesses and will spend US$2.7 billion on new technologies in 2019, according to IDC’s 2018 Small and Medium Business Spending Guide.

“The growth of digital economies is becoming an ever more impactful part of the global economy. The transition to a digital economy is a key driver of growth and development because it can provide a boost to the country’s productivity across all sectors and it creates an attractive environment for new investments from outside Malaysia. As the fourth industrial revolution becomes a key driver of the digital economy, entrepreneurs and SMEs need to assess fundamental aspects of their business, including what products and services they sell, how they deliver them to the market, the new skillsets required and how they need to organize to support their operations. Now is the time to take advantage of the new policies of the government and partner to accelerate new digital businesses,” said Randy Roberts, Research Director IoT and Telco, IDC Asia Pacific.

IDC strongly supports the new government’s plan to launch the National Fibre Connectivity Plan in 2019. This plan aims to develop broadband infrastructure to achieve a target of 30 Mbps speed per customer in rural and remote areas of the country within 5 years. This plan follows the implementation of the Mandatory Standard Access Pricing (MSAP) announcement from MCMC earlier this year that has successfully lowered broadband prices in order to connect more citizens to the digital economy.

“The high cost of a broadband connection in Malaysia has been one of the reasons small enterprises have delayed moving their business online. Government policies that improve the affordability, access and speed of broadband connectivity will increase the adoption of digital services and show the readiness of the economy to support digital initiatives” said Randy Roberts, Research Director IoT and Telco, IDC Asia Pacific.

IDC has documented examples of successful Public-Private Partnerships in the region, including Indonesia and Singapore, where the combination of public policy and entrepreneurship is driving the digital economy including smart city and mobile commerce services. In order to ensure the success of the digital initiatives in Malaysia, the government needs to consistently communicate the country’s digital priorities. The private sector should then follow with investment and development of resources in those areas, including development of key skillsets in the workforce to retain local talent.

According to Tran Hong Quang, director of the National Center for Socio-Economic Information and Forecast (NCIF), Vietnam has to shift towards an economic model that is more suited for Industry 4.0 due to a weakening of its current comparative advantage in natural resources and labour-intensive production. This is a view that is further reinforced by Luong Van Khoi, NCIF’s Vice Director, who said that Vietnam should focus on revising its economic model as part of the 2016 to 2020 economic reforms and aim towards improved social resources management, higher productivity and national competitiveness.

During this process, it is also essential for the country to identify sectors that have high potential and include them in the new FDI strategy. Citing a OECD research paper in which 66 million workers are projected to be replaced by machines in developing countries, Khoi further added that a number of jobs could potentially be replaced by robots such as factory work and industries such as manufacturing and processing risk being automated and will possess a lowered need for manpower.

In fact by 2025, about 42.8 million employees in Vietnam would be directly impacted by industry 4.0 and around 31 million will have to be retrained or change their jobs, Khoi continued.

Despite this, Le Huy Khoi, Head of the Industrial Policies Strategies Institute’s Study and Market Forecast Division under the Ministry of Industry and Trade, has commented that Industry 4.0 would open up more opportunities for Vietnam to grow its trade and industry sector and will encourage companies to improve their production methods, which will lead to cost reduction and improved productivity. Although, currently, awareness of industry 4.0 is still low among the business community and the technical infrastructure and technological applications have not been met. This was evidenced in a survey of 2,000 enterprises by Hanoi’s Small and Medium Enterprises Association, whereby 79 percent of the respondents indicated that they have not prepared for Industry 4.0, while another 55 percent are still attaining information regarding Industry 4.0 and 19 percent are currently working on Industry 4.0 plans. And of those surveyed, only 12 percent are executing Industry 4.0 plans.

To address those issues, Khoi has recommended that the government focus on education and work towards creating an awareness of Industry 4.0 through the dissemination of information in the political system, enterprises, business associations, research institutes and universities. Government agencies can also facilitate digital economy development, Industry 4.0 participation and application and the liberalisation of investment.

THAILAND: In lieu of the current demands of “Thailand 4.0”, Hitachi has established a Southeast Asian Lumada Centre in the Amata City Chonburi Industrial Estate in Chonburi, Thailand.

The centre’s new IoT platform, also known as ‘Lumada’, would not only offer solutions for customers in Thailand but also support growth in the Eastern Economic Corridor (EEC) by integrating successful solutions from Asian countries such as Japan and China as well as the United States of America. Similarly, in order to offer customised business solutions, Lumada would also be connecting and analysing customers’ data and engaging in co-creative opportunities with partners in the areas of digital technologies such as big data analytics, artificial intelligence (AI) and information and communication technology (ICT).

Further reinforcing Hitachi’s commitment towards supporting Thailand’s push for a digital economy, Toshiaki Higashihara, president & CEO of Hitachi, Ltd., has said: “Hitachi regards Thailand as an important market – the country represents the largest share of our business operations across the ASEAN market. We are proud to launch Lumada Center Southeast Asia, as part of our efforts to support Thailand’s vision to create a sustainable, value-based economy that is driven by innovation, technology and creativity”.

Looking into the future, Hitachi aims to utilise Lumada’s Operational Technology and Information Technology to achieve optimal results in manufacturing processes and seeks to implement business analysis and service ideation, to create viable business solutions in countries across ASEAN.